Vedanta seeks free land, cheap water, power in race to be India's first chipmaker

In a race to become India's first chip maker, Vedanta Ltd is seeking 1,000 acres (405 hectares) of free land from states and other incentives for its $20 billion foray into semiconductor and display manufacturing, sources told Reuters.

The oil-to-metals conglomerate in February said it will diversify into chip manufacturing and announced plans to form a joint venture with Taiwan's Foxconn to support Prime Minister Narendra Modi's plans to make India a semiconductor manufacturing hub.

Though Vedanta is seeking federal incentives under a Modi programme offering fiscal support, it is separately asking states for 1,000 acre of land free of cost on a lease for 99 years, according to two sources with direct knowledge of.

It needs 700 acres for its own facility, and the remainder for ancillaries.

Vedanta has told state governments that its operations would help them generate $2.2 billion in tax revenues over 20 years and create up to 100,000 direct and indirect jobs, said the first source.

The company is in the advanced stages of reviewing proposals from at least three Indian states, Telangana and Karnataka in the south, and Maharashtra in west added the source.

Vedanta did not respond to a request for comment. Representatives of the IT and industries department in the three states did not immediately respond.

More corporations and nation-states, including India, are looking at ways to have seamless access to chips, which is at the core of many future critical technologies such as artificial intelligence and 5G.

Most of the world's chip output is limited to a few countries like Taiwan and United States. India, albeit a late entrant, is now actively luring companies, saying in December it wants to "usher in a new era in electronics manufacturing."

From $15 billion in 2020, the Indian semiconductor market is estimated to reach $63 billion by 2026, the government says.

Chip plants generally consume electricity and water in huge quantities and their erratic supplies often concern industry in India.

As part of lobbying the states, Vedanta is demanding water and power at concessionary and fixed prices for a period of 20 years, the sources said.

The first source added that Vedanta expects its plants to eventually consume about 40 million litres of water daily. That would be roughly the amount of water required for a city with more than 300,000 people, going by the suggested benchmark for urban water supply by the Indian government.

Separately, while Modi's federal scheme could offer 50% financing support on the project's capital expenditure, Vedanta is seeking additional incentives from states, the source said.

India, hoping to attract more global investments in the space, will hold from Friday a three-day semiconductor conference in its southern tech hub of Bengaluru that Modi will inaugurate.

Singapore's IGSS Ventures and ISMC, a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel's Tower Semiconductor, have also sought federal incentives under Modi's programme.